-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, obMBnmosEBez2W4VjtPz6lyzFulY16M9j5b+PAbDnAxfkpJoOB8kk0P2F7cL0zAn FeYD760rMVA4j+3OJzpmhA== 0000715633-94-000014.txt : 19941121 0000715633-94-000014.hdr.sgml : 19941118 ACCESSION NUMBER: 0000715633-94-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941009 FILED AS OF DATE: 19941117 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VONS COMPANIES INC CENTRAL INDEX KEY: 0000715633 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 381623900 STATE OF INCORPORATION: MI FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08452 FILM NUMBER: 94560839 BUSINESS ADDRESS: STREET 1: 618 MICHILLINDA AVE CITY: ARCADIA STATE: CA ZIP: 91007 BUSINESS PHONE: 8188217000 MAIL ADDRESS: STREET 1: 618 MICHILLINDA AVENUE CITY: ARCADIA STATE: CA ZIP: 91007 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED SUPERMARKETS INC /MI//NEW/ DATE OF NAME CHANGE: 19870805 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ----------------------- FORM 10-Q (Mark one) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 9, 1994 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------- ------- Commission File Number 1-8452 ----------------------- THE VONS COMPANIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1623900 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 618 Michillinda Avenue, Arcadia, California 91007 (Address of principal executive offices and zip code) (818) 821-7000 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Shares of common stock outstanding at November 11, 1994 - 43,379,041 PART 1. FINANCIAL INFORMATION Item 1: Financial Statements THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS All amounts except share data in millions of dollars and as a percentage of sales (Unaudited)
Sixteen Weeks Ended Forty Weeks Ended --------------------------------------- --------------------------------------- October 9, 1994 October 10, 1993 October 9, 1994 October 10, 1993 ------------------ ------------------ ------------------ ------------------ Sales.............. $ 1,516.2 100.0% $ 1,534.5 100.0% $ 3,820.4 100.0% $ 3,904.0 100.0% ----------- ----- ----------- ----- ----------- ----- ----------- ----- Costs and expenses: Cost of sales, buying and occupancy...... 1,142.9 75.4 1,158.0 75.5 2,892.8 75.7 2,927.9 75.0 Selling and administrative expenses....... 317.6 20.9 319.4 20.8 806.9 21.1 821.4 21.0 Amortization of excess cost over net assets acquired....... 4.6 .3 4.6 .3 11.6 .3 11.6 .3 Restructuring charges........ 19.0 1.3 56.9 3.7 19.0 .5 56.9 1.5 ----------- ----- ----------- ----- ----------- ----- ----------- ----- 1,484.1 97.9 1,538.9 100.3 3,730.3 97.6 3,817.8 97.8 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Operating income (loss)........... 32.1 2.1 (4.4) (.3) 90.1 2.4 86.2 2.2 Interest expense, net.............. 21.7 1.4 20.6 1.3 54.2 1.4 50.7 1.3 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Income (loss) before income taxes............ 10.4 .7 (25.0) (1.6) 35.9 1.0 35.5 .9 Income taxes....... 6.4 .4 (5.5) (.3) 18.4 .5 21.4 .5 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Income (loss) before extraordinary item............. 4.0 .3 (19.5) (1.3) 17.5 .5 14.1 .4 Extraordinary item- debt refinancing, net of tax benefit of $1.0 million.......... - - (1.4) (.1) - - (1.4) (.1) ----------- ----- ----------- ----- ----------- ----- ----------- ----- Net income (loss).. 4.0 .3 (20.9) (1.4) 17.5 .5 12.7 .3 ----- ----- ----- ----- ----- ----- ----- ----- Retained earnings - beginning of period........... 194.7 183.2 181.2 149.6 ----------- ----------- ----------- ----------- Retained earnings - end of period.... $ 198.7 $ 162.3 $ 198.7 $ 162.3 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) per common share: Income (loss) before extraordinary item........... $ .09 $ (.45) $ .40 $ .32 Extraordinary item........... - (.03) - (.03) ----------- ----------- ----------- ----------- Net income (loss)........... $ .09 $ (.48) $ .40 $ .29 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common shares and common share equivalents...... 43,533,000 43,474,000 43,508,000 43,512,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- See accompanying notes to these condensed consolidated financial statements.
THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS All amounts in millions of dollars (Unaudited)
October 9, January 2, 1994 1994 ----------- ---------- ASSETS Current assets: Cash...................................... $ 6.2 $ 8.5 Accounts receivable....................... 44.9 36.3 Inventories............................... 342.1 383.5 Other..................................... 52.3 45.1 ----------- ---------- Total current assets.................... 445.5 473.4 Property and equipment, net................. 1,224.1 1,215.6 Excess of cost over net assets acquired..... 501.3 512.9 Other....................................... 56.5 47.6 ----------- ---------- TOTAL ASSETS................................ $ 2,227.4 $ 2,249.5 ----------- ---------- ----------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of capital lease obligations and long-term debt.......... $ 8.4 $ 8.6 Accounts payable.......................... 273.6 314.5 Accrued liabilities....................... 253.3 219.6 ----------- ---------- Total current liabilities............... 535.3 542.7 Accrued self-insurance...................... 108.0 102.3 Deferred income taxes....................... 120.7 111.2 Other noncurrent liabilities................ 85.1 86.4 Senior debt and capital lease obligations... 509.9 559.9 Subordinated debt, net...................... 325.0 322.1 ----------- ---------- Total liabilities....................... 1,684.0 1,724.6 ----------- ---------- Shareholders' equity: Common stock.............................. 4.3 4.3 Paid-in capital........................... 340.5 339.5 Retained earnings......................... 198.7 181.2 Notes receivable for stock................ (.1) (.1) ----------- ---------- Total shareholders' equity.............. 543.4 524.9 ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.. $ 2,227.4 $ 2,249.5 ----------- ---------- ----------- ---------- See accompanying notes to these condensed consolidated financial statements.
THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS All amounts in millions of dollars (Unaudited)
Sixteen Weeks Ended Forty Weeks Ended ------------------------- ------------------------ October 9, October 10, October 9, October 10, 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Cash flows from operating activities: Net income (loss).................................. $ 4.0 $ (20.9) $ 17.5 $ 12.7 Adjustments to reconcile net income (loss) to cash provided by operating activities: Debt refinancing............................... - 1.4 - 1.4 Restructuring charges.......................... 19.0 56.9 19.0 56.9 Depreciation and amortization of property and capital leases........................... 31.7 28.7 78.6 68.2 Amortization of excess cost over net assets acquired and other assets.................... 4.9 5.6 12.3 14.9 Amortization of debt discount and deferred financing costs.............................. 1.9 2.0 4.8 4.9 LIFO charge.................................... .9 1.5 1.7 4.4 Deferred income taxes.......................... (2.1) (6.0) .4 4.0 Change in assets and liabilities: (Increase) decrease in accounts receivable. 2.0 (.6) (8.6) 3.4 (Increase) decrease in inventories at FIFO costs.................................... (.2) (38.5) 39.7 (19.8) (Increase) decrease in other current assets (2.3) (5.1) 1.9 (2.7) (Increase) decrease in noncurrent assets... 4.2 (.8) (11.5) (8.6) Increase (decrease) in accounts payable.... 18.3 32.5 (40.0) (27.2) Increase (decrease) in accrued liabilities. 14.0 8.4 26.7 (19.0) Increase (decrease) in noncurrent liabilities.............................. (9.1) (10.8) (7.6) (9.5) ----------- ----------- ----------- ---------- Net cash provided by operating activities............ 87.2 54.3 134.9 84.0 ----------- ----------- ----------- ---------- Cash flows from investing activities: Addition of property, plant and equipment.......... (36.4) (106.2) (92.8) (181.9) Disposal of property, plant and equipment.......... 3.8 2.9 6.0 3.2 ----------- ----------- ----------- ---------- Net cash used for investing activities............... (32.6) (103.3) (86.8) (178.7) ----------- ----------- ----------- ---------- Cash flows from financing activities: Net borrowings (payments) on revolving debt........ (54.8) 51.7 (44.3) 99.0 Increase (decrease) in net outstanding drafts...... 1.8 (.3) (.9) 1.3 Payments on other debt, capital lease obligations and other........................................ (1.5) (2.3) (5.2) (7.4) ----------- ----------- ----------- ---------- Net cash provided (used) by financing activities..... (54.5) 49.1 (50.4) 92.9 ----------- ----------- ----------- ---------- Net cash increase (decrease)......................... .1 .1 (2.3) (1.8) Cash at beginning of period.......................... 6.1 6.4 8.5 8.3 ----------- ----------- ----------- ---------- Cash at end of period................................ $ 6.2 $ 6.5 $ 6.2 $ 6.5 ----------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest......................................... $ 22.3 $ 20.6 $ 53.1 $ 49.1 ----------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- Income taxes..................................... $ 11.2 $ 5.0 $ 25.7 $ 28.4 ----------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- Supplemental disclosures of non-cash investing and financing activity: Capital leases................................... $ - $ - $ .3 $ 7.7 ----------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- See accompanying notes to these condensed consolidated financial statements.
THE VONS COMPANIES, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The financial data included herein have been prepared by the Company without audit. In the opinion of management, all adjustments of a normal recurring nature necessary to present fairly the Company's consolidated financial position at October 9, 1994 and January 2, 1994 and the consolidated results of operations and cash flows for the sixteen and forty weeks ended October 9, 1994 and October 10, 1993 have been made. This interim information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report filed on Form 10-K. Due to seasonality and other market conditions, the results for the forty weeks ended October 9, 1994, should not be considered as indicative of the results to be expected for a full year. At October 9, 1994, the Company operated 336 supermarket and food and drug combination stores, primarily in Southern California, under the names Vons, Vons Food and Drug, Pavilions and EXPO. The Company also operates a fluid milk processing facility, an ice cream plant, a bakery, and distribution facilities for meat, grocery, produce and general merchandise. 2. Earthquake Loss On January 17, 1994, Southern California was struck by a major earthquake which resulted in the temporary closure of 45 of the Company's stores. All of the closed stores reopened within approximately one week of the earthquake. The Company carries insurance to protect against earthquake loss. The estimated total cost due to the earthquake is approximately $25 million which, after insurance recoveries, results in a pre-tax nonrecurring charge of approximately $5 million, or $.07 per share. The accompanying condensed consolidated financial statements include a $10 million receivable for insurance recoveries and a $5 million selling and administrative charge for the earthquake insurance deductible which was recorded in first quarter 1994. 3. Restructuring Charges During third quarter 1994, the Company recorded a restructuring charge of $19.0 million, or $.26 per share. This charge reflects anticipated expenses of $13.4 million associated with a program to accelerate the closing of underperforming facilities, including approximately 12 stores, the majority of which will be closed by year-end 1994. The charge also includes $5.6 million for severance and other costs associated with the elimination of approximately 400 administrative and support positions, the majority of which were eliminated during third quarter 1994. During third quarter 1993, the Company recorded a $56.9 million, or $.77 per share, restructuring charge. The 1993 charge reflected anticipated costs associated with a program to accelerate the closing of underperforming facilities, including approximately 11 stores, eliminate approximately 300 administrative and support positions and other programs intended to lower the Company's cost structure and enhance competitiveness. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Results of Operations On January 13, 1994, the Company introduced the "Vons Value Program." This program emphasizes low prices every day and improved customer service, and it represents a strategic repositioning of the Company's market focus. The Company plans to substantially offset the cost of the program over time through aggressive cost and expense reductions designed to permanently lower the Company's expense structure. The new marketing and cost and expense reduction programs are long-term strategies, the implementation of which will extend beyond 1994. During the first half of 1994, the Company reduced the prices of over 12,200 items, increased the allocation of store labor for customer checkout, and increased broadcast media advertising to better inform customers as to the many ways to save money at Vons, including newly reduced prices, weekly advertised specials and free membership club savings. The Northridge earthquake occurred four days following the introduction of the Vons Value Program. This event substantially disrupted the initial phase of the new program as both the Company and the communities it serves were focused on recovering from this tragic event. As a result, the Company undertook a costly relaunch of the new program late in first quarter 1994 which continued through second quarter 1994. By accelerating price reductions planned for later in the program and offering attractive promotions and advertised specials to reintroduce the program to consumers, gross margin and operating income were significantly reduced in second quarter 1994. The Company believes that third quarter 1994 earnings before restructuring charge reflect the benefits of the new program as improved inventory management, improved purchasing and continued expense reductions offset the effects of the price reductions and increased store labor expenses. Based on ongoing operational reviews, the Company determined that additional store closures and headcount reductions were required to achieve its cost containment and restructuring goals. As a result, a third quarter 1994 restructuring charge of $19.0 million, or $.26 per share, was recorded which reflects anticipated expenses relating to the accelerated closure of approximately 12 additional underperforming stores and the elimination of approximately 400 additional administrative and support positions. In aggregate, the Company's programs are initially intended to benefit sales, which in turn will improve the Company's ability to achieve strong, sustainable earnings growth over the long run. Sixteen Weeks Ended October 9, 1994 Compared with the Sixteen Weeks Ended October 10, 1993. Sales. Third quarter 1994 sales were $1,516.2 million, a decrease of $18.3 million, or 1.2%, from third quarter 1993 sales. Same store sales decreased 1.6% from third quarter 1993 sales. This represents the fourth consecutive quarter of improving same store sales trends. Sales reflect reduced prices as a result of the Vons Value Program, deflation in perishables, the ongoing impact of the weak economy, competitive new store and remodel activity and the diminished customer base in neighborhoods impacted by the Northridge earthquake. Since October 10, 1993, the Company has opened nine new stores, closed 23 stores and completed 22 store remodel projects. Costs and Expenses. Third quarter 1994 costs and expenses were $1,484.1 million, a decrease of $54.8 million, or 3.6%, from third quarter 1993. Cost of sales and buying and occupancy expenses as a percentage of sales decreased by 0.1 percentage point to 75.4% in third quarter 1994. Price reductions in 1994 were offset by improved inventory management and improved purchasing. Selling and administrative expenses as a percentage of sales increased by 0.1 percentage point to 20.9% in third quarter 1994. Increased store labor expenses, related to the Vons Value Program, were offset by a decrease in administrative expenses as a result of the reduction in work force and other cost savings initiatives in connection with the strategic restructuring program. The Company recorded a $19.0 million, or $.26 per share, restructuring charge in third quarter 1994. In third quarter 1993, the Company recorded a $56.9 million, or $.77 per share, restructuring charge. These charges primarily reflect anticipated expenses as a result of the accelerated closure of approximately 23 underperforming stores and other facilities and the elimination of approximately 700 administrative and support positions. Operating Income (Loss). Third quarter 1994 operating income was $32.1 million, an increase of $36.5 million over third quarter 1993. Operating margin increased to 2.1% in third quarter 1994 versus (.3)% in third quarter 1993. These increases were due primarily to the restructuring charge recorded in 1994 versus the 1993 restructuring charge. Operating income before depreciation and amortization of property, amortization of goodwill and other assets, LIFO and restructuring charges ("FIFO EBITDA") was $88.6 million, or 5.8% of sales, in third quarter 1994 compared with $88.3 million, or 5.8% of sales, in third quarter 1993. Interest Expense. Third quarter 1994 net interest expense was $21.7 million, an increase of $1.1 million over third quarter 1993. This increase was due primarily to higher weighted average interest cost on revolving debt partially offset by the replacement of higher interest cost subordinated debt. Income Taxes. Third quarter 1994 income tax provision was $6.4 million, or a 61.5% effective tax rate, primarily reflecting the impact of the 1994 restructuring charge. Third quarter 1993 income tax benefit was $5.5 million, or a 22.0% effective tax benefit rate, primarily reflecting the impact of the 1993 restructuring charge as well as the increase in the maximum statutory Federal income tax rate from 34% to 35%. Excluding these items, the effective tax rate was 48% for third quarter 1994 compared to 46% for third quarter 1993. The increase in the effective tax rate is due to the decrease in earnings before restructuring charges, which is not offset by a comparable decrease in amortization of excess cost over net assets acquired, of which the majority is not deductible for tax purposes. Income (Loss). Third quarter 1994 net income was $4.0 million, or $.09 per share, compared with a net loss of $20.9 million, or $.48 per share, in third quarter 1993. These increases were due to the $19.0 million, or $.26 per share, restructuring charge recorded in 1994 versus the $56.9 million, or $.77 per share, restructuring charge recorded in 1993. Third quarter 1993 net loss included an extraordinary after tax charge of $1.4 million, or $.03 per share, arising from debt refinancing. Forty Weeks Ended October 9, 1994 Compared with the Forty Weeks Ended October 10, 1993 Sales. Sales for the forty weeks ended October 9, 1994 were $3,820.4 million, a decrease of $83.6 million, or 2.1%, from the forty weeks ended October 10, 1993. The 1994 year-to-date same store sales decreased 3.2% from the 1993 year-to-date sales. Sales reflect reduced prices as a result of the Vons Value Program, deflation in perishables, the continuing weak overall economic environment in Southern California, ongoing competitive new store and remodel activity and the diminished customer base in neighborhoods impacted by the Northridge earthquake. Costs and Expenses. Costs and expenses for the forty weeks ended October 9, 1994 were $3,730.3 million, a decrease of $87.5 million, or 2.3%, from the comparable 1993 period. Cost of sales and buying and occupancy expenses as a percentage of sales were 75.7% for the forty weeks ended October 9, 1994, an increase of 0.7 percentage points, compared with the forty weeks ended October 10, 1993. The increase reflects the impact of lower prices and increased promotional activities. The LIFO charge was $1.7 million for the forty weeks ended October 9, 1994 compared with $4.4 million for the comparable 1993 period, reflecting the Company's expectation of lower inflation for 1994. Selling and administrative expenses as a percentage of sales were 21.1% in the 994 period, an increase of 0.1 percentage point over the comparable 1993 period. This increase reflects a $5.0 million charge related to the insurance deductible related to the Northridge earthquake. Increased store labor expenses as part of the Vons Value Program were offset by administrative expense reductions achieved as part of the cost containment and strategic restructuring program. The Company recorded a $19.0 million, or $.26 per share, restructuring charge in third quarter 1994. In third quarter 1993, the Company recorded a $56.9 million, or $.77 per share, restructuring charge. Operating Income. Operating income for the forty weeks ended October 9, 1994 was $90.1 million, an increase of $3.9 million, or 4.5%, over the forty weeks ended October 10, 1993. Operating margin increased to 2.4% in the 1994 forty week period versus 2.2% in the 1993 forty week period. Excluding restructuring charges, results were $109.1 million, or 2.9% of sales, versus $143.1 million, or 3.7% of sales. These decreases were due primarily to lower sales and lower gross margin as a result of price reductions. FIFO EBITDA excluding the earthquake insurance deductible was $206.7 million, or 5.4% of sales, for the forty weeks ended October 9, 1994 versus $230.6 million, or 5.9% of sales, for the forty weeks ended October 10, 1993. Interest Expense. Net interest expense for the forty weeks ended October 9, 1994 was $54.2 million, an increase of $3.5 million over the comparable 1993 period. This increase was due to higher weighted average interest cost on revolving debt and higher average debt borrowings. Income Taxes. The income tax provision for the forty weeks ended October 9, 1994 was $18.4 million, a 51.3% effective tax rate, or a 48% effective tax rate excluding the restructuring charge. The effective tax rate is higher than the incremental tax rate of 41.0% due to the decrease in earnings before restructuring charges which is not offset by a comparable decrease in amortization of excess cost over net assets acquired of which the majority is not deductible for tax purposes. Income. Net income for the forty weeks ended October 9, 1994 was $17.5 million, or $.40 per share, compared with net income of $12.7 million, or $.29 per share, for the forty weeks ended October 10, 1993. These increases were due to the $19.0 million, or $.26 per share, restructuring charge recorded in 1994 versus the $56.9 million, or $.77 per share, restructuring charge recorded in 1993. The decrease in net income excluding restructuring charges was caused by the decline in sales and gross margin reduction for price decreases. Net income for the 1993 period included an extraordinary after tax charge of $1.4 million, or $.03 per share, arising from debt refinancing. Labor Contract Status The Company renegotiated its contract with the International Brotherhood of Teamsters during third quarter 1994. The new contract, which covers all warehousing and driving units, became effective September 12, 1994 and will expire on September 13, 1998. Over the four year term of the new contract, the annual labor cost increases on a per hour basis will be lower than those in the previous contract which expired on September 11, 1994. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flows from operations and available credit under its Revolving Credit Facility. Management believes that these sources adequately provide for its working capital, capital expenditure and debt service needs. Net cash provided by operating activities was $87.2 million in third quarter 1994 compared with $54.3 million in third quarter 1993 and $134.9 million for the forty weeks ended October 9, 1994 compared with $84.0 million for the forty weeks ended October 10, 1993. These changes were due primarily to decreases in earnings before restructuring charges offset by changes in assets and liabilities generally reflecting the timing of receipts and disbursements. The ratio of current assets to current liabilities was 0.83 to 1 at October 9, 1994 compared with 0.87 to 1 at January 2, 1994. Net cash used by investing activities was $32.6 million in third quarter 1994 compared with $103.3 million in third quarter 1993 and $86.8 million for the forty weeks ended October 9, 1994 compared with $178.7 million for the forty weeks ended October 10, 1993. These decreases reflect a reduction in the Company's capital expenditure program. Full year capital expenditures are expected to be $168 million. The Company opened five stores, closed 14 stores and completed 11 store remodel projects during the forty weeks ended October 9, 1994. Capital expenditures in 1994 have been and will continue to be funded out of cash provided by operations, the Revolving Credit Facility and/or through operating leases. The capital expenditure program has substantial flexibility and is subject to revision based on various factors; including, but not limited to, business conditions, changing time constraints, cash flow requirements and competitive factors. In the near term, if the Company were to reduce substantially or postpone these programs, there would be no substantial impact on current operations and it is likely that more cash would be available for debt servicing. In the long-term, if these programs were substantially reduced, in the Company's opinion, its operating business and ultimately its cash flow would be adversely impacted. Net cash used by financing activities was $54.5 million in third quarter 1994 compared with net cash provided by financing activities of $49.1 million in third quarter 1993. Net cash used by financing activities was $50.4 million for the forty weeks ended October 9, 1994 compared with net cash provided by financing activities of $92.9 million for the forty weeks ended October 10, 1993. The level of borrowings under the Company's revolving debt is dependent primarily upon cash flows from operations and capital expenditure requirements. At October 9, 1994, the Company's revolving debt borrowings totaled $173.5 million compared with $353.7 million at October 10, 1993. This change reflects the impact of the $150 million Term Loan Facility entered into in fourth quarter 1993 and cash flows from operations partially offset by borrowings relating to the capital expenditure program. At October 9, 1994, the Company had available unused credit of $224.8 million under its Revolving Credit Facility. For the forty weeks ended October 9, 1994 the weighted average interest cost on revolving debt was 5.2%, the corresponding bank prime rate at October 9, 1994 was 7.75%. PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27 Financial Data Schedule. Management Contracts or Compensatory Plans or Arrangements: 10.30 Letter Agreement dated July 21, 1994 confirming employment and separation agreements between the Registrant and Peter M. Horn, III. 10.31 Retirement Agreement dated July 28, 1994 confirming employment and retirement agreements between the Registrant and Roger E. Stangeland. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended October 9, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE VONS COMPANIES, INC. Date: November 14, 1994 /s/ LAWRENCE A. DEL SANTO -- ------------------------------ Lawrence A. Del Santo Vice Chairman and Chief Executive Officer Date: November 14, 1994 /s/ PAMELA K. KNOUS -- ------------------------------ Pamela K. Knous Senior Vice President and Chief Financial Officer EX-1 2 Exhibit 10.30 [This page appears on The Vons Companies, Inc. letterhead] July 21, 1994 Mr. Peter M. Horn, III 1117 Calle Amapola San Dimas, CA 91773 Dear Peter: This letter confirms the agreement between The Vons Companies, Inc. the "Company") and you regarding your employment with the Company through December 31, 1995 and your retirement thereafter. 1. Your resignation as "Executive Vice President, Support Services" was effective July 15, 1994. Seven days following your execution hereof, provided you have not rescinded this agreement, you shall receive a check, representing the first portion of your severance payment, in the amount of $200,000, reduced by appropriate withholding taxes but, based upon your direction and certification that you will have no income tax on that amount, with no federal or state income taxes withheld. 2. Commencing July 16, 1994 and continuing through December 31, 1995, you will remain an employee of the Company in the position of "Special Advisor, Governmental Relations and Warehousing/Transportation" at the following salary rates for the periods shown: July 15, 1994 through September 3, 1994 - at the rate of $228,688 annually. September 4, 1994 through December 31, 1995 - at the rate of $50,000 annually. During this period you will report to Dick Goodspeed and will serve as the Company's representative as Chairman of the California Grocers Association, interface with governmental authorities, particularly Weights and Measures, as directed, and coordinate the A.T. Kearney Project. You will receive all employee benefits at current coverage levels, but will receive no further stock option grants, bonus awards or accrued vacation. You will receive the 401K Profit Sharing Company Contribution, if any, and associated match for the years 1994 and 1995 at the appropriate salary level stated above. You will continue to vest in all outstanding stock options through December 31, 1995. You will be reimbursed for associated business expense related to the above duties over and above amounts for which you are not reimbursed by the CGA. You need not keep regular business hours during these periods, but will be available as mutually agreed and will be supplied secretarial support and office space as needed, and will be provided a fax machine for your home office use until December 31, 1995. During this period, you may not work nor consult for any other company which competes with the Company in any respect. 3. Thereafter you will receive the following payments from the Company on the dates shown, less appropriate withholding: January 2, 1995 $89,064 representing your remaining severance payment December 29, 1995 $200,000 representing partial SERP payment January 2, 1996 $381,722 representing your remaining SERP payment. July 21, 1994 Page 2 4. Your retirement will be effective December 31, 1995, at which time your employment with the Company shall terminate and you shall be eligible for no further payments or benefits except as specifically provided herein. Thereafter you will receive retiree health benefits, from your medical account valued at approximately $90,000, and pension benefits of approximately $58,961 per year will commence. You will also receive 1987 Deferred Income Plan benefits totaling $162,171.17, payable $2,262.13 per month for 180 months, and your profit sharing account will be available as provided thereunder. In addition, your early retirement will be treated as normal "Retirement" under your various stock option agreements under the Company's 1990 Stock Option and Restricted Stock Plan. Consequently, you will have until December 31, 1996 within which to exercise all your outstanding, vested options. 5. You hereby agree to return to the Company within the time frames allotted all Company property in your possession, including, but not limited to, any Company credit cards, keys, any information proprietary to the Company in your possession, computer equipment and telephones. 6. You shall cooperate fully with the Company in its defense of or other participation in any administrative, judicial or other proceedings arising from any charge, complaint or other action which has been or may be filed. 7. You shall not disclose any confidential information you acquired while an employee of the Company to any other person or use such information in any manner that is detrimental to the Company's interests. 8. On behalf of yourself and your heirs and assigns, you hereby release and forever discharge the "Releasees" hereunder, consisting of the Company, and each of its associates; owners; stockholders; affiliates; divisions; subsidiaries; predecessors; successors; heirs, assigns; agents; directors; officers; partners; employees; insurers; representatives and lawyers, and all persons or entities acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of actions, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, loss, cost or expense, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called "Claims") which you now have or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof, including, without limiting the generality of the foregoing, any Claims arising out of, based upon, or relating to your hire, employment, remuneration or resignation by the Releasees, or any of them, including any Claims arising under Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act, as amended; the Equal Pay Act, as amended; the Fair Labor Standards Act, as amended; the Employee Retirement Income Security Act, as amended; the Older Workers Benefit Protection Act; the California Fair Employment and Housing Act, as amended; the California Labor Code; and/or any other local, state or federal law governing discrimination in employment and/or the payment of wages and benefits. July 21, 1994 Page 3 9. In accordance with the Older Workers Benefit Protection Act of 1990, you should be aware of the following: (a) You have the right to consult with an attorney before signing this agreement; (b) You have twenty-one (21) days from the date hereof to consider this agreement; and (c) You have seven (7) days after signing this agreement to revoke this agreement, and this agreement will not be effective until that revocation period has expired. 10. You have agreed that, except as may be required by law, neither you nor any member of your family, nor anyone employed by you, shall disclose the terms of this agreement to any individual or entity, other than your immediate family and your attorney or advisor reviewing this agreement. 11. The provisions of this agreement are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. 12. You represent that you have thoroughly read and considered all aspects of this agreement, that you understand all its provisions and that you are voluntarily entering into said agreement. If the above accurately reflects your understanding, please date and sign the enclosed copy of this letter in the places indicated below and return that copy to me on or before August 6, 1994. As noted above, this agreement will not become effective, and none of the retirement benefits will be paid, until seven (7) days after you sign this agreement. Very truly yours, /s/ LAWRENCE A. DEL SANTO Lawrence A. Del Santo Accepted and agreed to on this 25 day of July , 1994. - ---------------- ------------------------- -- /s/ PETER M. HORN, III - ------------------------------------------------------- PETER M. HORN, III EX-2 3 Exhibit 10.31 RETIREMENT AGREEMENT -------------------- This Retirement Agreement (the "Agreement") is made by and between Roger E. Stangeland ("Executive") and the Vons Companies, Inc. (the "Company"). It is the desire of the parties to this Agreement to resolve all issues pertaining to the retirement of Executive as an employee of the Company and to his service as a member of the Board of Directors of the Company. In consideration for the mutual promises, covenants and conditions hereinafter set forth, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, Executive and the Company agree as follows: 1. Duties: (a) Board of Directors. Executive shall continue ------- to serve as Chairman of the Board of Directors and a member of the Executive Committee until the Company's annual meeting of shareholders in May 1995, during which period he will chair all Board and Executive Committee meetings. Thereafter, Executive shall be replaced as Chairman, but shall continue to serve as a Board member for his remaining term, which expires May 1997, during which time he will hold the title of Chairman, Emeritus, and will serve on such committees as shall be assigned by the Board. (b) Employee and Consultant. Executive has resigned as Chief Executive Officer effective April 26, 1994. However, Executive shall remain as a full-time employee of the Company until his retirement from employment on December 31, 1994, providing advice and counsel to the Company and undertaking activities assigned by the CEO, including the representation of the Company in industry matters and within the community as assigned. Commencing January 1, 1995 and continuing through December 31, 1996, Executive shall serve as consultant to the Company, performing such services from time to time as shall be mutually agreed upon between Executive and the CEO. 2. Cash Compensation: Executive shall continue to receive his ------------------ current base salary at the rate of $606,050 per year and shall continue to participate in the Company's bonus plan at the targeted rate of 60% of base salary, with a maximum payout of 100% of base salary, for the duration of his term as an employee of the Company ending December 31, 1994. Thereafter, Executive shall be compensated as a consultant to the Company at the rate of $20,725 per fiscal period ($269,425 annual rate) through December 31, 1996, provided that a portion of such fee may be treated as a director's fee and converted to discounted stock options as provided in Paragraph 3 below. While receiving the aforesaid compensation, Executive shall receive no Board of Director fees. Commencing January 1, 1997 and continuing until the expiration of his current term in May 1997, Executive will receive annual Board of Director fees at the rate then in effect for non-management members of the Board of Directors, appropriately prorated for such period. While performing services for the Company as an employee and a consultant, Executive shall be reimbursed for all expenses accrued on behalf of the Company in accordance with the Company's expense reimbursement policies and practices. 3. Stock Options: Executive shall be granted no further stock options -------------- in 1994. On January 1, 1995 all non-exercised stock options which have previously been granted to Executive will become fully vested and will remain exercisable for the full term for which they were initially granted, notwithstanding the termination of Executive as an employee of the Company as provided above. The Company will amend Executive's stock option agreements to provide for such extended exercise. Commencing January 1, 1995 and for so long as Executive shall serve as a member of the Board of Directors, Executive shall receive an annual stock option grant in the amount then awarded pursuant to the Company's Directors' Stock Option Plan. In addition, Executive may waive his right to receive up to $20,000 per year of the consulting fees payable pursuant to Paragraph 3 above and receive such amount as director's fees, which may be converted into discounted stock options under the formula and pursuant to the terms and conditions set forth in the Directors' Stock Option Plan. 4. Office Arrangements: The Company will provide office and -------------------- secretarial support to Executive at a mutually acceptable location through December 31, 1996. 5. SERP Payment: On January 1, 1995 the Company shall pay to Executive ------------- a lump sum payment in the amount of $2,790,939 pursuant to the terms of the Company's Supplemental Executive Retirement Plan. Such payment shall terminate all obligations of the Company under such Plan. 6. Other Matters; No Other Benefits: Executive shall continue to --------------------------------- participate in the Company's Pension Plan, Profit Sharing Plan and Personal Choice benefit plans for the duration of his employment ending December 31, 1994. Thereafter he shall receive such payouts as are provided under such plans and, at his option, may elect to be covered either on a grandfathered basis by the Company's former medical plan for retired employees or the current such plan. Executive shall not be eligible for any employee benefits other than those enumerated herein and above and any other employee benefits accrued prior to the date hereof. Executive may maintain membership in the California Club and the Annandale Golf Club at his own cost for so long as he chooses, but upon his termination of membership therein, or upon his death, all equity interest therein shall revert to the Company. 7. Death of Executive. In the event of the termination of the ------------------ services of Executive prior to January 1, 1997 by reason of Executive's death, the Company shall pay to Executive (or, in the event of his death, his designated beneficiary, or if there is none, his estate), the cash compensation described in Section 2 hereof and Section 5 hereof, at the same times and in the same amounts as would otherwise be payable to Executive hereunder through December 31, 1996, plus any other benefits to which he or his beneficiary or estate is entitled under the Company's employee benefit plans, arrangements and agreements. 8. Non Competition; Other Employment: Executive agrees that through ---------------------------------- December 31, 1996 he will not compete with the Company in any respect, will not work or consult for anyone who competes with the Company; provided, however, that nothing in the foregoing provision shall prohibit Executive from owning up to 5% of the outstanding shares of any class of a publicly held company. 9. Release by Executive: Except as to rights or claims as may arise --------------------- from this Agreement, any other employee benefit plan, arrangement or agreement under which Executive has accrued but unpaid benefits, or contingent or continuing rights as of the date hereof and any rights as a shareholder of the Company, Executive releases and forever discharges the Company, including its present and former officers, directors, agents, employees, representatives or shareholders (including any entity employing, represented by or affiliated with any such present or former director, officer, agent, employee, representative or shareholder), parent companies, subsidiaries, affiliates, assigns and successors-in-interest, and all persons or entities acting by, through, under or in concert with them, or any of them, from any and all injuries, suits, charges, complaints, grievances, obligations, liabilities, losses, expenses, claims, demands, causes of action, damages, costs and all other legal responsibilities in any form whatsoever which he now has or may have in the future, in law or equity, connected with or incidental to Executive's employment with the Company, including, without limitation, any contracts or purported contracts of employment or severance agreements or other such arrangements. This waiver and release includes the release of any rights, claims, causes of action, demands, damages or costs arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the California Fair Employment and Housing Act, and any other federal, state or local laws or regulations prohibiting employment discrimination and any claim for wrongful termination. 10. Release by the Company: Except as to such rights or claims as may ----------------------- arise from the Agreement, the Company releases and forever discharges Executive, and his executor, successors-in-interest, heirs and assigns from any and all injuries, suits, charges, complaints, grievances, obligations, liabilities, losses, expenses, claims, demands, causes of action, damages, costs and all other legal responsibilities in any form whatsoever which it now has or may have in the future arising out of, connected with or incidental to his employment by, or his service as director of, the Company, or to the dealings between the parties occurring prior to the execution of this Agreement. 11. Indemnification of Executive: In addition to the foregoing, the ----------------------------- Company specifically agrees to indemnify, defend and hold Executive harmless from any and all claims or causes of action or complaints filed against him which arise out of or are connected with his employment by, or his service as director of, the Company, with the good faith discharge of his duties and as provided under California Labor Code Section 2802. Moreover, nothing contained in this Agreement shall prevent Executive from raising any defense to any such claims to the same extent that he would have been entitled to such defense as an employee of the Company. 12. Waiver of Civil Code Section 1542: Each party to this Agreement ---------------------------------- specifically waives the benefit of the provisions of Section 1542 of the Civil Code of the State of California, as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Executive and the Company acknowledge that they have read Civil Code Section 1542 and fully understand same. 13. Representations by Executive: ----------------------------- (a) Executive represents and warrants that he has not assigned or transferred to any other person, firm or corporation, in any manner, including by way of subrogation or operation of law or otherwise, any portion of any claim, right, demand, action or cause of action that he now has, or might have in the future arising out of his employment with the Company nor any portion of any recovery or settlement to which he may be entitled. (b) Executive represents and warrants that he has not filed and agrees not to file any action, claim or initiate any proceeding in any court or before an administrative agency asserting any claims that are specifically released herein or that arise from matters that are asserted herein. 14. Non Admission: Executive and the Company acknowledge that this -------------- agreement constitutes a settlement and is not an admission of liability, but is in compromise of disputed claims. In consideration of this Agreement, Executive and the Company assume the risk of any damage which now may be latent, unexpected or which may hereafter appear, develop or occur for any reason other than as a result of a breach of this Agreement, including, without limitation, attorneys' fees and costs incurred by either party in connection with this matter. 15. Costs and Fees: In the event that either party breaches the terms --------------- of this Agreement, the non-breaching party shall be entitled to recover in any action arising out of such breach reasonable attorneys' fees, as well as any costs of investigation and filing fees that may be incurred therein. 16. Arbitration: Any dispute arising under or relating to this ------------ Agreement shall be conclusively resolved by either (i) arbitration, conducted before a panel of three arbitrators in Los Angeles, California, in accordance with the rules of the American Arbitration Association then in effect or (ii) private judge, such as Judicial Arbitration and Mediation Service, Inc., or other comparable company, as selected by the party filing the action. The Company and Executive hereby agree that the arbitrator will not have the authority to award punitive damages, damages for emotional distress or any other damages that are not contractual in nature. Judgment may be entered on the arbitrator's award in any court heaving jurisdiction. 17. Confidentiality: The parties hereto understand and specifically ---------------- agree that the terms of this Agreement, and any other document executed pursuant thereto, shall remain confidential and any disclosure of the terms and conditions herein, except as to Executive's family, tax and personal advisors and counsel, and as to the Company, the Board of Directors, Compensation Committee, Legal Department and appropriate officers and advisors, shall be deemed a breach of this Agreement, except such disclosure as may be required of the Company to comply with the Securities Act or the Securities Exchange Act or any rules or regulations thereunder. 18. Investigation; No Reliance: Each party has made such investigation --------------------------- of the facts pertaining to this settlement and the Agreement as it deems necessary, and each party does not rely upon any statement, representation or promise of any other party, or of any officer, agent, employee, representative, or any attorney for the other party, in executing this Agreement, or in making this settlement provided for herein, except as expressly stated in this Agreement. 19. Governing Law: This Agreement shall be deemed to have been -------------- executed within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California. 20. Successors and Assigns: This Agreement is binding upon and shall ----------------------- inure to the benefit of the parties hereto, their respective agents, employees, representatives, officers, directors, divisions, parent companies, subsidiaries, affiliates, assigns, heirs, successors-in-interest and shareholders. 21. Severability: The provisions of this Agreement are severable. If ------------- any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. 22. Entire Agreement; Amendment: This agreement sets forth the entire ---------------------------- agreement between the parties and supersedes any and all prior oral or written agreements or understanding between them concerning the subject matter. This agreement may not be altered, amended or modified, except by a further written document signed by both parties. 23. Construction: Each party has cooperated in the preparation of this ------------- Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS, SEEK COUNSEL, AND CAREFULLY CONSIDER ALL OF THE PROVISIONS OF THE AGREEMENT BEFORE SIGNING IT. EXECUTIVE AGREES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS IT, AND IS VOLUNTARILY ENTERING INTO IT. EXECUTIVE HAS TWENTY- ONE (21) DAYS FROM ________________ (THROUGH ____________) TO EXECUTE THIS AGREEMENT. THIS AGREEMENT WILL NOT TAKE EFFECT FOR SEVEN (7) DAYS AFTER EXECUTIVE SIGNS IT. Dated: July 28 , 1994 /s/ ROGER E. STANGELAND ---------------- ------------------------------ Roger E. Stangeland THE VONS COMPANIES, INC. Dated: Aug 1 , 1994 By: /s/ LAWRENCE A. DEL SANTO ---------------- ------------------------- Lawrence A. Del Santo Chairman and Chief Executive Officer EX-27 4
5 This schedule contains summary financial information extracted from the Company's Condensed Consolidated Statements of Operations and Retained Earnings for the forty weeks ended October 9, 1994, the Consolidated Balance Sheets as of October 9, 1994 and the accompaning notes thereto and is qualified in its entirety by reference to such financial statements. QTR-3 JAN-02-1994 OCT-09-1994 6,200 0 44,900 0 342,100 445,500 1,658,200 434,100 2,227,400 535,300 509,900 4,300 0 0 539,100 2,227,400 3,820,400 3,820,400 2,892,800 3,730,300 0 0 54,200 35,900 18,400 17,500 0 0 0 17,500 0.40 0.40
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